INTRODUCTION

Most VAT regimes impose VAT only on sales for consideration, and the sale is taxable if there is a clear connection between the sale and that consideration. This chapter examines the required link between a sale and the consideration received by the seller that is a prerequisite to a taxable sale.

The classification of a sale as a sale of goods or a sale of services may be significant for tax purposes. For example, in most countries, imports of most goods are taxed but imports of only specified services are taxed. A sale for a single price may incorporate elements of multiple supplies that are taxed differently. For example, a portion of the sale, if supplied independently, would be taxable at a positive rate, and another portion, if supplied independently, may be exempt from tax. It therefore is significant for VAT purposes if the transaction is respected as a single supply or is treated as multiple supplies. In some cases, a transaction that includes elements that are both taxable and exempt, the VAT legislation and case law may draw a distinction between mixed supplies (with main and incidental elements) that are classified as a single supply of the main element, and composite supplies that can be disaggregated and classified as multiple independent supplies. This chapter explores the question – “what is ‘the supply’ for VAT purposes?